Security

Chipmaker Broadcom In ‘Advanced Talks’ To Acquire Leading Online and Device Security Co. Symantec For $15 Billion?

Broadcom, a leading chipmaker, could soon acquire cybersecurity company Symantec. The deal could be the second-largest full acquisition of a company for Broadcom. Last year, the company acquired CA Technologies for $18.9 Billion. While the exact figures or even the deal hasn’t been officially announced yet, Symantec is expected to cost Broadcom about $15 Billion. Needless to add, this is still a better valuation for the once-thriving but now seemingly struggling digital security company.

Broadcom is reportedly close to buying the cybersecurity firm Symantec. Sources with knowledge of the matter reportedly mentioned the two companies are nearing an agreement which would see the chipmaker acquire Symantec for around $15 Billion. Interestingly, there has been no official confirmation from either of the companies yet. Still, the sources insist the acquisition is nearly finalized and any update about the same could officially arrive any time after today, July 4, 2019. Experts, however, caution that the deal might still fall through. Several analysts are basing their assumptions on the fact that the current U.S. President Donald Trump didn’t allow Broadcom’s attempt to acquire leading mobile chip company Qualcomm.

Symantec’s Acquisition Would Further Boost Broadcom’s Foray Into The Software World

Broadcom is a leading company in the hardware world. It is a powerful player particular in silicon chips and processors that go into nearly every type of electronics. The company specializes in manufacturing semiconductors. In fact, Broadcom’s Chief Executive Officer Hock Tan’s acquisition strategy has proven to cause one of the biggest consolidations in the semiconductor industry. So far, the CEO has been instrumental in consolidating the $470 billion chip industry by aggressively acquiring several small companies that would have never matched in size and output of Broadcom.

Making further inroads into the software world may seem odd. However, Mr. Tan’s strategy is quite interesting. He always prefers to buy companies that have no obvious overlap. Needless to add, Mr. Tan has pursued financial and operational goals which are generally observed primarily in the private equity world. Hence, a chipmaker acquiring another software company with a completely different objective than CA Technologies isn’t odd.

Symantec’s Acquisition Could Be A Good Decision For Broadcom

Buying Symantec would be a great acquisition and investment strategy. The acquisition of software giant CA Technologies has already started to appear a good decision. From an acquisition perspective, Symantec is at a great position for Broadcom. The once-thriving company has been continually hit by adverse circumstances. Amidst the rising competition, waning interest in dedicated third-party antivirus platforms, a rapid shift to the more secure and mobile ecosystem, Symantec has suffered.

However, Symantec is still considered as a reliable cybersecurity company. Prominent private equity firms have been steadily eyeing Symantec. The company acquired two organizations with a diverse set of product portfolios last year. While Blue Coat Systems offers security solutions to enterprises, LifeLock offers protection against identity theft. Despite the fact that these acquisitions have somehow failed to boost the company’s growth, Symantec is at a good position for acquisition.

At $15 Billion, Symantec is about $6 Billion lower than what it was worth less than two years ago. To top it, Symantec had spent close to $ 7 Billion in acquisitions in 2016. In simple words, the company is obviously a lot more worthy than the dollar figure it currently represents. By acquiring Symantec, Broadcom could easily infuse renewed interest and vigor into the underperforming software company. In the past the Broadcom CEO has proven how streamlining the operations of the acquired companies and significantly narrowing the interests and projects can rejuvenate companies that were in a slump.

Symantec could be easily considered as an important asset for chipmaker Broadcom as it covers the other end of the spectrum. Both CA Technologies and Symantec do not have anything common between them. However, together the trio commands a large and stable customer base that would face a lot of inherent challenges to switch over to another vendor with a similarly expansive and comprehensive bouquet of products.

Large corporations have shown affinity towards companies that offer products that need most of their needs. Apart from ensuring smooth functioning of services and dedicated single-window support, companies with large portfolio allow for better economics while finalizing multi-year deals.

Symantec is one of the world’s biggest makers of cyber-security software. According to the company’s own admission in its annual report, it actively provides its services and portfolio of security products to more than 350,000 organizations and 50 million people. It makes Antivirus, Antispyware, and several other digital protection platforms that attempt to safeguard enterprise platforms as well as personal computers from the relentless attacks.

News About Possible Acquisition Benefits Symantec But Impacts Broadcom Negatively:

Share markets reacted well towards Symantec, whose shares rose as much as 16% Wednesday in New York. Needless to add, this is the largest intraday gain for the company in almost eight months. Symantec’s shares closed at $22.10 per share. This puts Symantec’s market valuation at about $13.7 Billion, a gain of $2 Billion.

Perhaps the slightly higher valuation of $15 Billion by Broadcom, impacted its shares negatively. Owing to the news of the possible acquisition, Broadcom shares slipped about 3.5 percent. Broadcom shares closed at $295.33 Tuesday. Simple math reveals that Broadcom’s valuation lost $4 Billion in a single day of trading. Still, Broadcom currently sits at a lofty valuation of $118 Billion.

If Broadcom does end up buying Symantec, it would have followed in the footsteps of Intel. In 2011, Intel Corp. acquired McAfee Inc. for $7.7 billion. Intel wanted to hardcode some of the software’s capabilities into its processors. However, for some reasons, the attempt didn’t succeed, and Intel eventually sold the company to TPG at a diminished price of $4.2 Billion. Broadcom’s CEO, however, often takes a completely different approach to acquisitions and hence it would be interesting to see how he reworks the company.


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